What is Central Sales Tax (CST)?

Central Sales Tax or CST is imposed on sale or purchase of goods occurring the the course of inter-state trade or commerce.

Value Added Tax (VAT) is applicable on purchase or sale of goods within a state, whereas CST is levied on interstate purchase or sale of goods. Note: The VAT regime has ended and GST is applicable in India from 1st July 2017.

When CST is applicable?

CST is applicable when there is inter-state sale or purchase of goods including work contract. Newspapers are exempt from CST. However, mere transfer of goods to a branch or another unit of the same entity would not attract CST. CST applicable only when there is sale or purchase. For a sale or purchase to have occurred under CST regulations, there must be transfer of document of title to the goods during the movement of goods from one state to another.

CST Payment

CST tax is collected and retained by the State from where the transfer or sale takes place. Hence CST payment would be due monthly or quarterly and varies from state to state.

CST - Form C

Under CST regulations, tax liability on inter-state sales is 2% or the rate of tax for sale within State, whichever is lower, provided the sale is effected between a registered dealer and a registered purchasing dealer.

CST Rate of 2% can be claimed if:

Sale is made by a registered dealer and goods sold are covered in the registration certificate of the buying dealer.

Hence, concessional rate of tax is applicable if selling dealer provides proof that purchasing dealer is eligible to get these goods at concessional rate. Form C is thus evidence provided by buying dealer to the selling dealer to avail concessional CST tax rate of 2%.

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Frequently Asked Questions

Common questions about Central Sales Tax (CST) Explained: Inter.

Central Sales Tax (CST) is a tax imposed on the sale or purchase of goods that occurs during the course of inter-state trade or commerce. It is levied on transactions where goods move from one state to another within India.

Value Added Tax (VAT) was applicable on the purchase or sale of goods within a state, whereas CST was levied on interstate purchase or sale of goods. However, both VAT and CST have been subsumed by the Goods and Services Tax (GST) regime, which was implemented on July 1, 2017.

CST was applicable when there was an inter-state sale or purchase of goods, including work contracts. However, the mere transfer of goods to a branch or another unit of the same entity did not attract CST. CST was only applicable when there was an actual sale or purchase.

Under CST regulations, if a sale was made by a registered dealer to a registered purchasing dealer, the tax liability on the inter-state sale was reduced to 2% or the rate of tax for sale within the state, whichever was lower. Form C was the evidence provided by the buying dealer to the selling dealer to avail the concessional CST tax rate of 2%.

CST tax was collected and retained by the state from where the transfer or sale took place. The payment of CST was due monthly or quarterly, and the frequency varied from state to state.

To avail the concessional CST rate of 2%, the sale had to be made by a registered dealer, and the goods sold had to be covered in the registration certificate of the buying dealer. The selling dealer had to obtain proof that the purchasing dealer was eligible to get the goods at the concessional rate.

Yes, newspapers were exempt from CST.

For a sale or purchase to be considered under CST regulations, there had to be a transfer of document of title to the goods during the movement of goods from one state to another.

CST was applicable only when there was an actual sale or purchase of goods. A mere transfer of goods to a branch or another unit of the same entity did not attract CST.

With the introduction of the Goods and Services Tax (GST) regime in India on July 1, 2017, both CST and VAT were subsumed into the new GST system.